Wall Street, The Guys Who Brought Us The Recession Preventing Record Domestic Oil Production From Producing Lower Gas Prices
But First Snide's Remarks: Drill Baby Drill Really Means Export Baby Export! Why are so many "patriotic" Republicans(See Real Patriots Choose Flex-fuel) so in love with this non-solution to our gasoline problem, and why are they and other anti-American right wingers against the drop in replacement of bad regular E10 by Good regular E85? What do you think? Comment below.
NEW YORK April 12, 2012; The NACSonline newsletter reported that a piece in Fortune earlier this week highlights the curious case for rising U.S. gas prices: While the U.S. “is enjoying an energy boom,” producing more crude oil than at least one OPEC country, the price of gas is $4 or more per gallon, even as demand hits historic lows.
“[M]ore drilling is happening now, and prices are still going up,” writes Leah McGrath Goodman. The reason? “Wall Street has changed the formula for pricing gasoline.”
Until last year, gas prices were directly linked to the price of U.S. crude oil, which was set daily in Cushing, Oklahoma, the largest oil-storage hub in the United States. However, today, U.S. gas prices are tracked to the price of Brent crude, a type of oil found in the North Sea. And Brent crude trades at roughly $20 more per barrel than U.S. oil.
Therefore, even while more drilling is taking place on U.S. soil, the price benchmark has resisted a decrease, as it is linked to more expensive oil.
“This is an unprecedented shift,” writes McGrath Goodman. “Since the dawn of the modern-day oil markets in downtown Manhattan in the 1980s, U.S. gasoline prices have followed the domestic oil price…In the past year, U.S. oil prices have repeatedly traded in the double-digits below the Brent price. That is money Wall Street cannot afford to walk away from.”
Wall Street traders and major oil companies, therefore, seek the highest price for oil, and “just because an oil company drills inside U.S. borders doesn’t mean it has to sell to a U.S. buyer,” McGrath Goodman notes. Overseas buyers, she said, offer greater profit, which is winning over patriotism.
“This is why Americans should carefully consider the sacrifice of wildlife preservation areas before designating them for oil drilling,” she adds. “The harsh reality is that we may never see a drop of oil that comes from some of our most precious lands.”
As more North American pipelines emerge, this will lead to greater exports, which may lower global prices in the long term, though lead to “more of our North American petroleum products…lost to competition from abroad” in the short term.
“America will have to fight to keep oil on its shores instead of seeing it shipped to another country — by paying dearly for that privilege,” McGrath Goodman concludes.
“Energy independence may be within our reach. But it comes at a price.”